Monday, January 30, 2012

Jenkins Report Fails Conservative R&D Strategies

This year, Ottawa and the provinces spent $4.7-billion to more than 20,000 Canadian companies under one of the richest R&D tax expenditures in the world.

But a third or more of that cash is being wasted and paid to consultants as a result of unclear rules on what’s legitimate R&D and limited government auditing resources, according to dozens of interviews with consultants, claimants and government officials.

That's why Harper is getting support from industry that is inflating the prices of work or expenditures.

The program is prone to abuse because the risk of getting caught is low. Tax authorities routinely accept a significant percentage of refund claims with little or no vetting in what one CRA source called the R&D industry’s “dirty secret.”

Does the Tony Clement spending come to mind? Puts the Liberal Adscam embarrassment into perspective.

For example, we will continue to make the key investments in science and technology necessary to sustain a modern competitive economy. But we believe that Canada’s less than optimal results for those investments is a significant problem for our country. Harper in Davros

In line with feedback from stakeholders, we are recommending that the SR&ED program should be simpliﬁed. Speciﬁcally, for SMEs, the base for the tax credit should be labour-related costs, and the tax credit rate should be adjusted upward. The current base, which is wider than that used by many other countries, includes non-labour costs, such as materials and capital equipment, the calculation of which can be highly complex. This complexity results in excessive compliance costs for claimants and dissipates a portion of the program’s beneﬁt in fees for third-party consultants hired to prepare claims. Source: Jenkins Report

Put simply, the government strategy is that tax credits to corporations should result in job creation or investment into research and development. Looks like it doesn't. It's wasted instead on machinery and capital equipment. I wonder if Caterpillar will take the machinery away with it when it goes south? How much machinery is being put into the pipelines?

Harper blames red tape for eating up the costs and showing less benefit for the free money incentive to industry. In fact, it is the lack of front loading of clearly written documentation and planning. His government is incompetent. R & D should be results oriented, observable, quantifiable. We have professionals that write proposals, yet Harper wants to keep secrets in house. Well, the tar sands mess just shows how well that works out.